tv Press Here NBC October 21, 2012 9:00am-9:30am PDT
free and will cut you a check. this week, a real estate agency that works nearly for free. in fact, they will cut you a check. red fin founder glen kelman explains how it works. plus, car repair at a guaranteed price in your own driveway threatening the future of the corner garage. later, the secrets behind netflix. with reporters and john schwartz of usa today, this week on president here. >> i am scott ma grew. we have lots to talk about disruption this morning. companies taking old-fashioned industries and shaking them up. my first guest left an industry so badly shaken someone threatened to break his knees.
>> we'll say why did you do this? why would you ever? >> they never did catch the fell lo he that threatened glen kelman and we don't know what industry the bad guy worked in, but we can make an educated guess, it was real estate. that's because kelman's company red fin is doing to real estate agents what online travel sites did to travel agents. red fin real estate agents don't take the usual 6% commission, selling a home meaning a savings of tens of thousands of dollars. if you're buying a home, red fin takes its split from the selling agent, usually 3%, and gives you most of the money. glen kelman is founder of red fin and serves as the ceo. the first job is worng at a roast beef sandwich shop washing dishes and tells the l.a. times he spent his teen years smelling so much like roast beef his own
dogs would attack him in his sleep. now, we have some time, not a lot, but some time to talk about how you're disrupting the industry, and no matter how much time we give it, i don't think people will fully appreciate how much you have, and i go back to tivo. when we with first saw tivo, and tried to explain it to people, we got a blank stare. then they got one. you used it. let's do our best. how are you disrupting the real estate industry? >> well, there is a few things we do. we publish all the information so we got access to the databases that real estate agents use and put it all online so consumers can see it, and then we hired our own real estate agents and paid them to put the customer first. >> they are your employees. we are not paying them a commission. >> that's the crazy part. we started as a software company and decided that if we really wanted to change the game, we had to hire our own agents, so today we have 300 or 400 agents all across the country and the
idea is that they're paid a customer satisfaction bonus so that if you're happy, they make money, and if you're not, they don't. that allows us not only to have the digital part of the experience be really revolutionary but also the service part. the question we had when we starred the business, i am not the founder, i am just the ceo, but when we had to decide what we wanted to do with this business, we could turn over leads to traditional real estate agents or really try to change the game and we decided we wanted to change the game, and this meant having a digital business that also has personal service. >> why hasn't anybody done this before? we have real estate listings but nobody tries to do this that i am aware of. >> they're not that crazy. it is easier running a software business. that's what i did before, and it is a digital business with pure digital margins. you don't have to worry about a real estate agent showing up at 3:00 on a saturday afternoon to open someone's door or hang a yard sign or write an offer.
for us the challenge has been going market by market getting good local people and really delivering consistent quality service. it is a larger opportunity because there is $60 billion in fees paid to real estate agents and we think we can do a better job. >> when you disrupt such an old industry aside from somebody threatening to beat the hell out of you, in general what feedback have you heard from them? >> i think that's changed. i went on 60 minutes and said it is the most screwed up industry in america and can a lot of people were upset and i don't think it was the most diplomatic approach. i still want to change the game. i think we have to work with real estate agents in the bay area, in seattle, and so we have adopted a less stride ent tone. >> but it is a disruption. >> you can be as polite as you want to. it is this idea. just so the viewer understands, if i get a red fin real estate
agent, and i don't buy a house, they get paid. because you're paying them. if i buy a house, they get paid. >> that's right. >> they're your employees. it is how i feel about them that actually when i essentially kind of a yelp version of real estate is what they're depending on and it is a complete change in the way that real estate is done. >> it is a complete change in the accountability in the business where the agent is accountable not just for any result but a good result. if you're not happy, he doesn't make money. >> and therefore the agents are not spending their time finding more listings. >> the real disruption is our agents are about six times more productive. they're closing two or three deals per month and don't spend any time prospecting for clients. they're not really allowed to do that. >> do they make more money? otherwise why would they want to work more? >> they're in the 90th percentile of agent pay. we come into a market and say what do agents make and tie our
agent's pay to the 90% percentile. there are some that make more because they're so good with customers. there are some who make less, but that's where we want to average it. it is still real estate agents in silicon valley and everywhere else who are the top 1%, but i think so the dirty secret in the industry is most real estate agents are struggling to get by, so our agents are making somewhere between 50 and $150,000 a year depending on which market we're in and they tend to be some of the best paid people in the industry. >> i was going to ask you who you were working with among real estate agents. i was wondering if they were young and up and comers. >> it is a mix. we started with young turks, so you start with someone who has been working with a 60-year-old top producer but he is the number 2 guy waiting for his turn, and then you say you really think that turn is going to come? is the internet going to change real estate so much by the time you're the top dog it just won't be there anymore? then the other folks that really
tend to work well with us are folks whose kids went away to school, who have lived in a community for 20 years, and they don't like calling all of their friends and prospecting for business but they love real estate, they know the neighborhood. they know the schools. if you give them an opportunity to work hard, they'll do great. i think the demographic for our agents has broadened over the past few years and it has broadened our consumer demographic, the kind of customers we work with and used to be google and microsoft folks that look like me and now i think there is all sorts of folks who work with red fin. >> the dynamics have changed in the sense it used to be a hired a real estate agent and usually he or she were the only person who could know where the open houses were or the available houses and now i go online and i say i want three bedrooms, shouldn't be any more than this, in the following zip code. i am doing a lot of work. so i should be rewarded for that. >> right. most people who hire a traditional agent are paying the
agent for all the time he spent looking for them. >> which i am doing anyway. i am doing it for fun. >> i mean looking for the customer. >> very good. yeah. >> agents work their hails off trying to figure out where their next client is going to come from. most agents could be much busier if they had enough customers they would be much busier, so all we do is say don't worry about that. the customer is going to do the research on his own. you as the agent are going to focus on just serving that customer and that means we can deliver better service and still save people 5 to $10,000 when they buy the house. >> that's an important point. real estate agents from what i understand from what you're saying, most of their job is finding more listings to drive the business, not necessarily for serving me and finding me my house. >> i want to be careful here. >> i am not trying to push you. >> i am a real estate agent.
the hardest part about choosing red fin's business model is when we made the choice my friends in silicon valley, i came from here, started a software company, said, look, glen. he is now a real estate agent. >> are you really? >> i am not a licensed agent. i run a brokerage. it is a customer service business. it is not just a technology business. i have to worry about it when an agent doesn't show up on time. i have to worry about it when a client feels like he could have gotten a little bit more for the house that he is selling and having a customer service business is just operationally intense and weird and crazy for somebody who is used to just pushing bits up to a website and making money from that. i love it now. at first, it was a real change. >> not to get you in trouble again. >> keep trying. >> i have to move onto my next guest on television. we'll do a couple more minutes on the web. if you're watching television, we'll be back in a minute. otherwise check the web as well.
if you're the grocery shopper, you know a pound of hamburger costs about 3.99, maybe less on sail but pretty standard price. not all products work that way. a dozen capsules of amox sill len may cost more at walgreens than cvs, and two dentists may charge wildly different amounts for the same filling. car repair, a new fuel pump may cost more at sam's garage than at bill's. >> the winner is your mechanic. >> art agriwell wants to standardize car repair costs. his new online service sends a repair man to your house or
ochs. you choose the mechanic, but the price is constant. for instance, new brakes, $361.52 period. he is a serial start-up entrepreneur that drives a 22-year-old honda accord. thanks for being with us. i know people are fascinate the by the guy coming to your house and doing the oil change or doing the brake repair or whatnot. we can talk about that. that's fine. what i think is fascinating is the idea of this is how much it is going to cost period. before the guy even shows up. i love that. >> right. this is the reason i started the business. the mechanic comes to you, it sort of happened to us. the initial version of the idea was like when i go to a shop, like how do i know i am paying a fair price? my car is there. i am almost like a victim. they can say if your car is not starting $600. how do i know $600 is a fair
price? i wanted to create a place where you can go and say i need a new alternator or brakes and it gives you a fixed fair price and tells you why $600 is a fair price because it takes three hours to do the job, the part costs $400. this is how the price is good. that's what we have done. the mechanic comes to you is a nice add-on. >> my question, the price is one thing. how do i also know what you're telling me, the problem, is really the problem. every time you take your car to a shop you think it is brake pads and they call you back, and oh, we need to replace this and this. how do you make that more transparent? >> we do a bunch of things. the first most important thing we do, we always give you free second opinion. let's say the mechanic comes to you and says you need oxygen sensors and you're not sure if this is what you need. >> i don't know what that is.
>> i know a few things. >> i would have never guessed. >> that is the limit of my understanding of cars. go on. >> really desperate. >> so you can call one of our employees, and we have employees, mechanic employees that answer phone calls and you can call them and say this mechanic came to my house and he says i need oxygen sensor. what do i need to ask to know if this is what i really need. secondly, when you go on the site and say i need oxygen sensor, we immediately tell you what are the common symptoms, where y you need it and whether you should care about this or not. the total transparency, it is making it easy for people that don't know much about cars. >> are you saying i can call you on the phone and saying this guy told me this and is that true? >> right. >> and never charge me any money at all. >> no. free with every booking. you have to have an appointment. as long as you do, i will give you free second opinion. >> and they talk about sticker shock. it happened in our family a couple days ago. my son wanted new tires and we
had no idea how much it was going to cost until that day. >> that's the one thing. we have a static pricing, but here is the other question. are these the cheapest prices you can find and how good are the mechanics if they're charging less than the others? >> our prices are not the cheapest prices. i want to be clear about this. the idea is like you have people in your community, mechanics, doctors, lawyers, if we could connect you with these people and work with them like a friend who is a mechanic that comes out and helps you when you need something, and these guys when they're working for shops and dealers, they make very little money. you would be shocked if you knew what a mercedes master technician makes. >> they can't do this on the side, can they? >> they can and that's what they're doing. >> what do they make on average or what's the range? >> the guy is probably making 25 an hour flat rate. if you walk in a dealership and no disrespect to dealerships,
are you probably paying 140, 150 an hour. there is a huge difference. what we do is bridge the gap. in some cases we are cheaper, 20, 30%. in some cases we're more expensive. we probably charge a little bit more for convenience, but in most cases we can probably lower the price quite a bit. >> there is a point where some people would be uncomfortable about bringing a stranger to their house, the mechanic. >> yeah. >> don't worry, it is on camera. >> it is not a bug, it is a feature. >> there is a point in which people who might be uncomfortable about coming to the house and you adopt some of the social media as well. there are good videos there of people with real people with real mechanics and there are kind of yelp like scores for the mechanics as well so that you feel a bit more comfortable about that. >> and we do background checks
and verify work and criminal record and driving history and they have to have a clean record before they can work with us. then you see the ratings, et cetera. >> if the ratings are particularly good or bad and you get a lot of complaints you cut ties. >> you cut ties with them. >> about a minute left. brain storm with me. what other industries would benefit from set pricing? that's the part i love. >> any service industry today exactly like this. you go to a lawyer. you go to a house handy man and cleaning service and there is no standardization of pricing. you never know like why something costs or how much and should i call 50 places to get the better prices. every single service that you have to buy if they had some place you could go and say this is what i want and this is what the fair price is. >> fair enough. congratulations on your tech crunch as well. we'll be back in just a minute.
welcome back. to be netflix is to have your business disrupted the way blockbuster did when netflix came onto the scene. have you been to a plok buster lately in even netflix can be net flicked. gina keating takes a look at the history of the disruptive company and where it might be headed. keating spent two years researching and writing netflix. thank you for being with us this morning. >> thank you for having me. >> i would have figured you had three reporters that knew the history of netflix. i went to netflix before i had a dvd player and i would get them in the mail and put them back in the mail because it was a $500 to get a dvd player. i thought i knew the history of netflix. in the first few chappers of your book i realized i was wrong. >> so did i.
i covered them for eight years. i thought i knew everything. founder.d down the other there was an entirely unknown chapter about the founding team. >> reed hastings was late to netflix. you think of him coming up with it by himself and the story about it was some movie that he returned late. >> apollo 13. >> thank you very much. not actually the case. >> no. it probably happened. i am sure he thought about it, but, no, basically there was another guy who worked for reed haitings who was about to get fired from his company because the company was being acquired and he said i would really like to start something like amazon, amazon of something and he said i will give you $2 million and let's talk about it as we commute and for four months they tossed around ideas and late in the process they heard about dvds in a test market at that time and they mailed a dvd from the santa cruz post office to reed's house and that was it. when it came out and it was
totally unscathed, they decided this could be a business. >> born. >> yeah. >> i am going to talk from personal experience and keep it short. >> once upon a time. >> i used to use netflix religiously and i stopped using it almost entirely, and i am wondering that was around the time when they had the two separate services and that fiasco. was there a tipping point with the company where a lot of the loyal customers left never to come back? i still use it occasionally but not that often. >> streaming or dvd by mail? >> i use streaming now and stopped using dvd altogether. streaming, there is limited. >> there is nothing. >> there is nothing. >> a lot of people complaint about that but with quickster, they were turned off by that and the price tag was bad and it got out ahead of them which was unfortunate because they meant to say you will have to pay for streaming now because you never
had to pay for it before and we are going to use the money to get you better content. that was supposed to be the message, yeah, sorry we're going to have to raise prices on some of you, not all of you, but we're going to put the money to good use. it will be a better service. what happened is they briefed somebody, some other executives about it, it got into the social media and took off and people were furious and they thought incorrectly everyone was going to have the prices raised by 60% and the company, people said unfortunate things about lattes and stuff like that, and then reed sort of compounded the error by going out and saying let me tell you about this quickster thing, will you have two different cues and billings and people were outraged and angry because the company had been so responsive before. >> people had bought in early. it is kind of your apple in netflix and virgin america airlines and you're kind of one of the team. >> right. >> you feel and i think people felt a bit betrayed by that.
>> absolutely. that was the greatest thing about netflix and why they were able to grow so fast is because people really invested in that brand emotionally. the market or the website is very -- it is a market research platform, and the company is constantly testing different aspects. is this a better color? do you like the button here or here? what about this language? >> you wrote in your book 20% churn, not in customers. >> no. >> in employees. >> right. >> wow. >> i know. it is tremendous. that's mcdonald's. >> it is. it is because they're extremely demanding on people. that is reed hastings likens his company to a nfl team. we're not here to be touchy and feely and supportive of each other. if you're picked, you're the best. we'll pay you better but we're going to work you and it has always been that way. >> i was going to ask what is his standing now in the pan thon
of ceos? a couple years ago he was looked upon -- >> fortune had him as the business person of the year in 2010. >> that was the beginning of the downfall. >> and at the faa conference they were hissing at him and he seemed almost sheepish? where is it? i assume somewhere in the middle. >> yeah, i would think so. they recovered i would say from operationally speaking recovered from that but the brand is damaged. no question about that. he just -- it revealed a side of him i think people didn't really know what was arrogance, he had all of his long time executive team left and there is nobody there to tell him no and he is a very strong-willed guy. >> do you think he should step down? >> no. no way. here is the thing about reed so
fantastic. he gets a lot of data from the website and most of the time he will use it which was unlike a lot of other founters who really identify themselves with the company and do what they want to do. he normally doesn't do that. >> blockbuster ignored netflix and dvds until it was almost too late but i learned in your book it came darn close to killing netflix. it was closer than we realized. on the spreadsheets, it wasn't. >> we go of course that happened. of course. in 2007 blockbuster had a proposition called total access and went into huge debt to fund this because you could take the movie you got in the mail into a blockbuster store and they were losing $2 on each disk. it was ridiculous. they were so committed though that they were bringing in 100%
of the new subscribers in the face and netflix went to them twice and said this will kill both of us. you're getting killed by debt and you're taking our subscribers and we're going to collapse. why don't you let us have that business and you can go right into streaming or whatever it is you're going to do and blockbuster said no both times and it was a disaster. >> and then they changed their mind. they almost won the bloody, bloody war and bailed out on its own. it is a great book. it is a fascinating book called netflix. we appreciate you being with us this morning.